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Jobs Report Not as Bad as You May Think

Stocks in this article: KFRC MAN

Editor's Note: This story is part of a special series, "30 Days of CEOs." Each day in September, TheStreet will publish an interview with a chief executive. To follow the series, visit and bookmark our "corner office."

NEW YORK ( TheStreet) -- If there's one corporate sector that should have a pretty good handle on the job market, it's staffing companies, and they don't see what the markets see in August's weak jobs number.

On Friday, the nonfarm payrolls report showed no net new jobs created. Yet the staffing companies insist that the markets are pricing in a much worse employment outlook than the pound-the-pavement hiring reality indicates.

The key line item for staffing companies in the Bureau of Labor Statistics report -- temporary services -- was actually revised up for both July and August.

Jeffrey A. Joerres, chairman and chief executive officer of ManpowerGroup

"It's hard to read a double dip into the numbers," said ManpowerGroup (MAN) Chairman and CEO Jeffrey Joerres, though he allowed, "It's flattening and at a critical point, and we could see this flatten out for a while and be in a tepid growth environment."

The temporary services line item in the nonfarm payroll data has ranged between 6% and 8% growth this year, which borders on a stall compared with last year.

R.W. Baird & Co. analyst Mark Marcon said the reason for concern is that even if temp hiring remains up, it's fallen off so much. Previous to the revisions, the temp services sector had been in decline for several consecutive months.

"Temp services was really good year last year, and since February, we've stalled out in terms of material sequential gains," the analyst said.

Deceleration in hiring has occurred -- and it was already occurring before the latest jobs data.

The Baird analyst said that Manpower's U.S. growth showed signs of deceleration in the recently reported second quarter, well before the latest jobs report. Manpower's CEO noted that the company revised down its revenue outlook for both the U.S. and the global business when it reported second quarter results. Baird's Marcon said part of it is the cyclical nature of temp hiring, which tends to crest in the earlier part of a business cycle in sectors including light industrials and clerical work.

Still, if the latest labor data don't suggest a double dip, the numbers don't rule one out either.

"We've hit a soft patch. In the very short term, it's anyone's bet. We could see it go either way," said Manpower's Joerres.

And this uncertainty is reflected in the shares of companies in the staffing sector, including Manpower, trading near 52-week low levels.

The disconnect between the market and staffing sector view is partially a byproduct of a different ways of gauging the labor market. The staffing companies are focused on what they can take away from current conversations with clients.

"We don't see clients, big, medium or small, speaking to us like they spoke in 2008, when they were saying, 'This is going to hurt.' They are adjusting on margins and being cautious but ... there is no death and despair, and to me that's a positive," said Manpower CEO Joerres.

Baird analyst Marcon said, "These companies have three to five weeks of forward visibility, whereas the market is looking ahead six months, and the disconnect is in what the market is fearful will occur in the future vs. what's right in front of these companies."

Manpower, which derives a majority of its revenue in Europe, also has to contend with fears related to the European sovereign debt crisis. Manpower's Joerres said, "The equity markets are placing their bets that macro indicators will have a big impact on the labor market but we are not seeing nor anticipating it. We are seeing slow to moderate growth and don't anticipate big shockwaves."

Michael Blackman, chief corporate development officer at Kforce (KFRC), which specializes in IT staffing, said that while the labor number on temporary hiring looks weaker, it doesn't show the market the bifurcation that is taking place in the labor market for skilled vs. nonskilled workers.

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